The Generations Legal Group Podcast

Trust Management Made Simple: Avoiding Common Mistakes

• Todd Whatley

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Attorney Todd Whatley addresses the critical components of trust management and highlights common trust mistakes that attorneys should help clients avoid. He provides insight into how elder law attorneys can differentiate themselves from DIY solutions and financial advisors attempting to provide estate planning.

• DIY estate planning services and financial advisors are aggressively targeting clients, claiming lawyers aren't necessary
• Trust documents need specialized language to handle incapacity periods before death, not just asset transfers after death
• Testamentary trusts provide significant protection from bankruptcy, divorce, and lawsuits for beneficiaries
• The biggest mistake in trust planning is failure to fund the trust by properly titling assets
• Multiple co-trustees often create family conflict; consider recommending corporate trustees instead
• Careful trustee selection is critical for proper trust administration
• Trustees have fiduciary duties and should maintain detailed records and communication
• Attorneys should avoid amending other professionals' trust documents due to malpractice concerns
• Regular trust reviews (every five years) are essential as family situations and laws change

For more information about Todd's elder law coaching services, visit theelderlawcoach.com to schedule a free consultation call.


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Speaker 1:

Thank you. Specialized experience, Whether you're an established attorney looking to refine your expertise or an emerging lawyer seeking a successful foray into elder law, this is your masterclass. Now let's get started with the luminary in the field. Here's Todd Whatley.

Speaker 2:

That's right. This is the Elder Law Coach. My name is Todd Whatley, and so I want to jump right into it. I'm going to start a series of podcasts that are not really coaching type things, but they are just, I want to say, practice management type things, things that you, as an attorney, need to know to run your practice well, and things that I've learned over 25 years, and so the next few podcasts are going to be me talking about things that I hope will help you in the office, help clarify some things and hopefully help you practice better. Okay, so let's jump in to this one.

Speaker 2:

This one I am tiling trust management and common mistakes, and so if you do elder law, I'm sure that you do trust, and a lot of people come to elder law from trust, and so you may know most of this, but I think, working as an elder law attorney, your estate planning changes some, because you see some things that occur toward the end of life and it's like, wow, this could have been handled much differently with the trust worded differently than if you just deal with okay when you die. I want to make sure these things go efficiently, but, as I tell people, there's a lot of life just before death, okay, unless you just drop dead, you're in a car wreck or something. If you go the way most people go, they will be incapacitated for some length of time. They will have some period of time where they're going to need care and the trust needs to be worded so that it can take care of those things. All right, and I want to start out by saying, since I have gotten my financial planning license, I'm kind of on the financial side of things and I see things that your friends who are financial advisors see and you probably know, the public is being inundated with offers and suggestions to do their own estate planning.

Speaker 2:

Legalzoom has been around now for a lot of years and there are a lot of services out there like LegalZoom and I will tell you your financial advisors are being bombarded with webinars and different things to say, hey, your clients don't need lawyers, you can do their estate plan, you can do things for them, you can. Here's this software and I actually attended one of those and sat through it. The guy was just like oh yeah, we can do your estate plan and sat through it and the guy was just like oh yeah, we can do your estate plan, you as a financial advisor, you can do your client's plans, trust powers of attorney, you can do everything, and that keeps them from going to the lawyer, which you run the potential of your client thinking the lawyer's better equipped to do this than you. And if you don't ever send them to the lawyer, you get to keep them, you make money from it. But the big and if you don't ever send them to the lawyer, you get to keep them, you make money from it. But the big thing is you don't have to worry about the lawyer stealing your client.

Speaker 2:

I was just like, oh my Lord. And so toward the end of it I said so how are you, how are you not practicing law without a license? And he jumped in and said oh, todd from Arkansas, you need to understand that these are done by attorneys, that the company has attorneys and attorney. I'm like, but you didn't mention this through the entire seminar and I don't think you tell your client that, and you know, but still do they ever meet with that attorney? And basically he's like Todd, we can talk later. And I was like okay, so obviously we never talk later, but I am just telling you those people are out there and they are pushing clients to do their estate plan through them. So how do we combat that? Well, you have to combat that by being better than them, which I know that you are. But there are certain things that you need to advertise, you need to bring up in public events when you're speaking, and I want to go through some things that will help you differentiate yourself from other attorneys, but particularly even from do-it-yourself trust plans and financial advisors who are doing this for their clients.

Speaker 2:

So, number one, trust are very powerful tools. A trust, as you know, can manage assets during life, to distribute them after death and protect beneficiaries. Okay, and I think that third point I'll get to it in just a second but I think your ability to protect the assets for the beneficiaries is something that those do-it-yourself trusts don't do. It's just outright distributions at their death to their kids, and that is a great way to have people go from using their advisor or doing it themselves and even from using the beneficiary plan, the payable on death. You know beneficiary deed, you know that plan of probate avoidance. You can really get people to see the value of a trust when you say, hey, I can leave this to your child in trust, as opposed to outright, and it's protected from bankruptcy, divorce and lawsuits. I'll go into that more in just a second. But you, you know, realize how powerful a tool that a trust is.

Speaker 2:

Avoiding probate your state, you know probate may not be a big deal, but it's still a deal and putting things into a trust will help people be able to avoid probate and get things to their heirs very quickly. So common uses for a trust are avoiding probate we just talked about that. Reducing estate taxes If you have a fairly wealthy client, you can make sure that things are arranged so that it avoids the estate tax. We can make sure that both spouses get their full advantage from that. Protecting assets from creditors that's where we get into the irrevocable trust and I can promise you financial advisors are not recommending those or I hope they're not, because that is just asking for a lawsuit. But we can offer irrevocable trust and I will do a future podcast on when and when not to use those. So just keep that in mind.

Speaker 2:

But we can do irrevocable trust which will protect it from creditors, from Medicaid, different things like that, and I think a very common thing that most financial advisors don't think about and people doing this on their own. They don't think about incapacity. They don't think about the time that they're going to be incapacitated prior to death that they need to plan for. They don't want to think about it. Time that they're going to be incapacitated prior to death that they need to plan for, they don't want to think about it and they're like, oh, I'll be fine, well, okay. So remember the different types of trust revocable living trust, irrevocable trust, special needs trust, medicaid asset protection trust. Okay, those are very common trust we can do and I can promise you the financial advisor, the do it yourself people will not recommend those and these are high value, high benefit plans that only you can offer people.

Speaker 2:

So one thing that's important that the financial advisor and and obviously, the do it yourself plans can't do is replicate your role in this. Our role as the attorney is to listen to the client and let the client know they're only going to go through this once. They may redo their trust a few times, but still they're going through it once, maybe twice. We go through it every day. We've gone through it hundreds or thousands of times and it's our experience and what we know that they don't know is why it's important to work with us. So you need to listen to the client's goals and tailor the trust to what they want. A phrase that I have started is look, it is my job as your attorney to take your magic wand. You get your magic wand, decide what you want to do. If you could wave a magic wand over this entire process, what would you like to see happen? It's my job to put that into writing and do-it-yourself.

Speaker 2:

And financial advisors are not going to give them that level of specificity or that level of freedom to decide what the trust needs to do. We as attorneys obviously understand the rules. We understand the estate planning statutes and we ensure compliance to those. And the software that you use is backed up. Hopefully you are using software that's another podcast but hopefully you were using a well-recognized software program to do this, not just for efficiency, but to make sure that this is done according to state law and is updated frequently. So the other thing we as the attorneys do is we ensure compliance and then with us, we can make those changes. I promise you, when the attorney for the financial advisor does that, they email it to them. The financial advisor is not going to be able to explain it to them, not be able to help them comprehend what is going on in this trust. Where we can, ok, and we can make changes, if we're sitting there and the client doesn't like it, we can make those changes. The financial advisor in the do-it-yourself program can't do that.

Speaker 2:

So what are some common mistakes that we see? Number one the biggest mistake we always see is failure to fund the trust. I've been doing this for 25 years and just in the last six years I have, at our six months, I have added a funding coordinator in my office and there are numerous reasons I do this, but number one I think it's so important that people get their trust funded that we have a funding coordinator who meets with the clients and make sure that everything gets into the trust, and we need to explain to the client why that is important. Just having a trust doesn't mean that you're avoiding probate. You either have to have the asset in the name of the trust now or payable on death to the trust at the time of your death, and the failure to do this is probate. So educate your clients and if you have enough volume to justify a funding coordinator, I would encourage you hire someone just to do that or get someone in your office now to add that to their schedule to say, hey, I want you to meet with these people and make sure that everything's funded into the trust.

Speaker 2:

Another mistake is ambiguous language. My fear is when people are doing these DIY trust or wills or POAs they look at it and they're like, yeah, I don't like that language, I'm going to change it. Well, we know how devastating that can be. What makes sense to the common person can be twisted and turned around by attorneys to mean God knows what. Okay, and so that's another thing we do. Is we, you know again the magic wand of the client to say, well, here's what I would like to happen. We put that into very clear, unambiguous language to make sure that happens. And I think the only way they can do that is to work with an attorney.

Speaker 2:

Trustee selection I have three kids. Let's name all three kids as co-trustees, and that's what a lot of people do when they do these documents on their own. And I'm sure if they told their financial advisor, hey, I want all three kids to be the trustee, the financial advisor's like, sure, why not? Well, we know what a disaster that can be and it's our job to help the client decide who should be the trustee, not just the oldest kid. It may be the oldest kid, it may be the oldest kid, but is that kid the one most qualified to do this job? And I will tell y'all, just as a practice pointer.

Speaker 2:

I have really started pushing people toward corporate trustees. It's a job, a full-time, a good size trust with a fair amount of assets is going to be almost a full-time job for the trustee to do what needs to be done. And if your kids are still working and they have jobs, trying to squeeze this into their busy day is just going to be a huge inconvenience and it's going to be a problem, all right. And so I encourage people to, as I say, give your family the gift of a commercial trustee. Okay, let someone who's trained in this, who has the time to do it. Yes, it's going to cost a little bit of money, but it's worth it. Okay, to make sure it's done correctly and to not burden a child. They think they're giving a child a gift by naming them as the trustee. What they're doing is saddling them with a job and the kid's going to think why did I get chosen for this? And they may see it as an honor at first, but when it's hours and hours of work that they're having to squeeze in and chances are they're not getting any more of the estate, there's a chance they get bitter and they're like hey guys, I'm doing more work, I want more money. And they're like no mom said to divide it equally. And there we go. There's the problem, and God forbid if you have three trustees. So it's important for us to use our experience and tell the client look, you've only been through this once. I've been through it thousands of times and I'm telling you you want a commercial trustee or you want one trustee. If you can't get them to do a commercial trustee, God forbid, don't name three.

Speaker 2:

One mistake I see from very competent, very popular estate planning attorneys near me is not leaving the funds in testamentary trust for the children. Okay, so I did a previous podcast, a few podcasts back, episode number 39. The name of it is Spotting Mistakes. I did that podcast as a way to get people to move their trust from where they have it to you because of these two mistakes, and I go in to that in much more detail in that podcast, but that's episode 39. All right, so go back and listen to that. It's a great way to get people to fire their old attorney and hire you, okay.

Speaker 2:

But one of those things I talk about is how you should always leave the money to the beneficiaries in testamentary trust. Okay, that way it's protected from bankruptcy, divorce and lawsuits and it's just a great way to give the clients reassurance. I've had people who say I don't want to pay for a trust, I would rather do beneficiary designations because I don't want to spend that much money. I'm like okay, just understand, with beneficiary designations, when the bank writes them a check, when the house sells and they get the check from the proceeds of your sale, it is to them outright free of trust. And if your child happens to be going through bankruptcy, divorce or a lawsuit and I always throw this in or if they're unduly influenced by their spouse, that money has no protections. And I have had people get wide-eyed and say, oh, I didn't realize that. I'm like yeah, I'm not trying to persuade you away from payable on death. If that's what you want to do by George, let's do it. But as your attorney, I need you to understand, let's do it. But as your attorney, I need you to understand. Here's the consequences of that very cheap, very quick solution and I've had people hire me to say, oh, I want that. I'm like, okay, well, it's going to be 5450. And that's what I charged for one of my levels of trust. But particularly for that type of specificity, it's 54-50, the trust POAs and everything, and they're like that's a lot of money, but I want to make sure when I'm gone it's going to be protected for my kids. I'm like, okay, let's do it.

Speaker 2:

The other thing that will persuade people to fire their old attorney and come to you is how the transfer of successor trustee comes into play. I don't want to take any more time in this podcast to explain that, but most trusts have option. Number one is they resign. Option number two is you get two physicians or one physician sometime. Or number three is you go to court. I throw in a fourth option.

Speaker 2:

Okay, I discussed that in episode number 39. Go back and listen to that and I go into it in detail. All right, so what are some challenges with a trust in trust administration? Okay, the trustee needs to understand that they have a fiduciary responsibility. I tell my clients, since you've hired me to do your trust and, as you know, your death, get through the funeral. There's no rush, but then they get to come see me for free and I will walk them through this process of administering the trust. Very rarely do people hire me to do that, because I think my trust is very straightforward. I know there are attorneys who make pretty good money from trust administration. I know there are attorneys who make pretty good money from trust administration. I don't. I'm not sure if I'm just not doing it right or what.

Speaker 2:

But the family comes in. I say, hey, ignore almost all of this trust other than these two pages that say what you do now that your parents have passed away. They're like, oh, that's easy, I'll never see them again, all right, but you need to understand one thing I do tell them is you have a fiduciary duty to your, to the other beneficiaries typically your, your siblings and no, they can sue you if you do something incorrect. And they're like, oh, okay, I encourage them to keep very accurate records because everything needs to be documented and shown and how that is to progress. They need to prove what they have done. And then also, I encourage them to get with a CPA very quickly to figure out what the tax obligations are and a huge administration thing is lack of communication. Communicate with the other beneficiaries. I tell them look, understand, they can sue you and if you're not talking to them, they're going to assume the worst. Be open, explain to them what's going on, what you're doing, who you're talking to, which real estate agents you're using to sell the house, why you chose that real estate agent. Keep them informed and, particularly if they ask questions, you need to let them know what's going on.

Speaker 2:

All right, as attorneys, we need to let the public know. If I draft the trust, I'm the person who can amend it. Okay, and typically you're do it yourself and, I would think, the financial advisor. Once the trust is done, they're like thank goodness, that's done, let's move on to something else. And if the client wants to amend their trust, that's a problem. Okay, and I will tell you I have recently changed my policy in my office that I won't say I will never but I rarely now will not amend another attorney's trust or a do-it-yourself trust.

Speaker 2:

I called my practice carrier. I got alerted to this from a Facebook post from an attorney in all caps that said never amend another attorney's trust. I learned this the hard way and so you ought to call your malpractice carrier. If you are amending the trust of other attorneys and see what their position is on this, mine said we will back you up on your amendments. But if you get sued by the beneficiary saying, hey, since you amended the trust, we are assuming that you reviewed the entire trust and you fixed all of the problems. Here's this problem with this trust. And since you're the last attorney to amend it, you've taken that on as your own and therefore we're suing you for this. Well, your malpractice carrier is not going to cover you or probably won't cover you for that. That's a problem. And so I have stopped amending other attorneys' trust and will only amend mine.

Speaker 2:

And so you can tell your client hey, if you do a trust on your own or with a financial advisor, amending it is going to be difficult. You're going to have a difficulty finding an attorney who will amend someone else's trust because malpractice doesn't cover it and people have changes all the time. And so again, just start with us. Let us be the first one you work with and we'll amend the trust as we need to in the future. I will say also, as attorneys, we need to encourage your clients to periodically review the trust.

Speaker 2:

I think most people who do this by DIY or through their financial advisor, they think I'm done, I don't have to worry about it. They think, okay, I did a trust, it's all protected, I'm good from now on. And we know that's not true. Family situations change, laws change, assets change, there's divorces, there's births. We encourage people to update your trust or have it reviewed periodically I say every five years. And again, if you do it DIY or with a financial advisor, you're going to have difficulty finding an attorney to get them to do that, and so let them know that from the start.

Speaker 2:

Remind clients that we go through continuing education, that we have to go through hours, 12 hours, 15 hours of continuing education every year, and as attorneys, we tend to do our continuing education on the topics that we cover and therefore we are staying up to date with this. Our software is continually telling us new changes, new trends. We are up to date. Do it yourself. Financial advisors probably don't stay up to date on that. We do, and that's why you should use us as the person to do your trust. All right, do videos? Do blog posts? Do you know? Update your website so that you are incorporating this into your website? And just know, in summary, that people out there, the public, is being inundated by non-attorneys to do their estate plan. We have to address this, and number one know it's happening, and number two know it's happening and number two address it and hopefully, through this podcast, I have helped you understand what you need to do to tell the public when you're out there.

Speaker 2:

Put on your website that here's the reasons you should not do a DIY power of attorney trust whatever, and you should not even really use your financial advisor because they can't do everything that we as attorneys do. You have to prove your wealth, I'm sorry. You have to prove your worth. Okay, it's not just going to happen. You know, the day of assuming that they needed to go to see an attorney for something is quickly disappearing.

Speaker 2:

We have to prove we are the professional that can do this and you need to come see us. All, right, I do coaching. Okay, I would love to be your coach. If, if this has inspired you, if you want to go into further depth, if you want to learn how to do all aspects of elder law, I would love to be your elder law coach. Go to my website, the elder law coachcom. There's a place there. You can schedule a free phone call with me. Let's discuss it, let's see where you are, let's see what you need and let's get you doing the best job in the world. Okay, thanks for listening and we will see you next time.

Speaker 1:

Thank you for joining this episode of the Elder Law Coach podcast. For those eager to take their elder law practice to new heights and are interested in Todd's acclaimed coaching program, visit wwwtheelderlawcoachcom. With Todd Whatley by your side, the journey to becoming an elder law authority has never been more achievable. Until next time, keep learning, keep growing and stay passionate about elder law.